The gold market is cautiously optimistic this year. A number of analysts are predicting gold prices above $1,400, while more cautious investors believe ending 2019 at $1,350 would be a positive performance that would set metal up for further success next year.
But before you start investing in gold, it pays to understand what pushes and pulls gold prices up and down. No one can answer exactly why speculative commodities like gold increase or decrease in value, pointing to one cause and one effect, because there are simply too many factors at play all at once. However, you can make a more educated decision by familiarizing yourself with some of the main talking points around gold.
1) Gold Prices Depend on Investor Sentiment
Want to know where gold prices are going to go? Ask yourself this question: are people afraid to put their money in stocks right now? A volatile stock market is always going to increase demand for gold. Whether or not that affects prices is another story, as factors like supply can accommodate the increased demand. Nevertheless, fearful investors are always a good indicator of a positive trend in gold.
2) Supply
Unlike equities or bonds, gold is a natural resource and finite. There is a limited quantity of gold in the world and mining costs continue to go up, as most of the world’s easily accessible gold has already been mined. On average, it costs the top gold mining firms between $500 and $800 per ounce of gold to operate.
3) Enduring Intrinsic Value
The intrinsic value of gold has remained remarkably stable over hundreds of years. Intrinsic value refers to the individual investor’s own estimation of the value of a stock or commodity. Gold’s intrinsic value has been remarkably consistent, making it a reliable inflation. When you hear the elderly complain about how high prices have become due to inflation, you’re hearing a complaint that currency has no intrinsic value. That’s what makes gold such a haven for your wealth.
4) Interest Rates
One downside to gold is that the metal does not produce interest rates. It’s a tangible asset and it sits in storage, gaining or losing value depending on market changes. When interest rates are high, there are better, more productive ways to invest that will deliver bigger returns.
On the other hand, there are also real interest rates to consider. Real interest rates are the difference between interest rates and inflation, and if inflation is higher than interest rates, you get negative real rates. Since bonds are gold’s main competitor as an investment vehicle, negative real rates on bonds (low interest rates vs. high inflation) push gold’s popularity.
Anyone who wants to follow live gold prices or view historical charts should click here for more information and analyze price patterns themselves. There are many factors that affect gold prices, including investor sentiment, inflation, interest rates, money policies, and more. Buying gold at the right price sets you up for success when you sell. Don’t get caught up in a bubble. Buy gold before the crowd rushes in and you will always have the upper hand.